How Important is Conversion Optimization to Your Business

With over 20 years in the digital marketing field, the number one approach to quickly generate the greatest impact on a business’s results that I’ve witnessed has been accomplished through conversion rate optimization.

Conversion optimization is the most important step to improving your business results without increasing spending. Through identifying and improving each step in your conversion process you’re able to increase results with current traffic while keeping costs fixed. This multiplies your ROI.

Although conversion optimization is defined by the outcome of the dollars and cents, it is important to know how its importance will also change how you see your business. Let’s dive deeper into the magic effect of this process.

What is Conversion Rate Optimization

Conversion Rate Optimization (CRO as commonly referred) is not a thing or a tool, but rather it’s a process. The process begins by identifying the steps from beginning (“hi, I’m over here”) to end (“cha-ching the cash register rings”), and clearly understanding what you have control over.

Once you apply the process, the goal is to incrementally improve results by small compounding percentages (or big if there is lots of improvement required). It is these incremental improvements that compound into jaw-dropping end of the process dollars and cents in your pocket.

Who can perform Conversion Rate Optimization

Here is the good news. Anyone can perform conversion optimization. In fact, I recommend every small business owner go through the process to have a base understanding.

Now the bad news. Sometimes (bahaha…I should say almost always) our ability to openly and clearly see things (roadblocks in the conversion process) is often blurred or completely hidden to those who are close to a situation.

So although I recommend every business owner to go through the process, it is also imperative that you don’t limit conversion optimization to eyes that are emotionally attached to the outcome. Unbiased, fresh eyes on your process and the numbers can be enlightening and should be an ongoing step in your conversion optimization system.

What Tools and Skills are Required to Perform Conversion Optimization

There are some skills and tools that you will require to analyze and complete the optimization process. There are also key points that you will need data to measure and optimize. The good news is, this is not rocket science for most small businesses. Let’s cover the major tools and skills here.

The number one skill you will need is patience and humility. Patience to analyze the data, patience to test assumptions, and the humility to accept that you are often wrong. After all, optimization is about being wrong fast so you can get to right. I call this failing fast forward.

You will need some basic math skills to do some number crunching. Don’t worry if you’re not a math genius, this is the stuff that a twelve-year-old could do, once they know the formulas. The formulas are key, as is the data source.

Google Analytics (or comparable tool) to provide you the data you need to evaluate visitors that are arriving on your website from your various marketing initiatives. You don’t have to be a data analyst to use this tool (which is free by the way), but you do need to have a good understanding.

If you need some help with Google Analytics, you can check out our step by step training here, or simply hop on YouTube for some DIY basic training.

Marketing metrics. Assuming you are using a digital platform for marketing (ie. Google Ads, FaceBook, etc.) these platforms will all provide the metrics you will need to connect the dots. However, if you are using more of a traditional medium (i.e. newspaper, direct mail), then you will need the basic numbers of distribution and a system for tying them to results.

That’s pretty much all you need. The beauty is conversion optimization is free. You don’t have to pay for anything you need, just the cost of time and sweat.

Comparing Conversion Optimization to Increasing Advertising Spend

One of the biggest reasons I love conversion optimization is the fact that you can get great results without spending a penny more than you already spend on advertising. In fact, the results can and should crush what you could achieve by simply spending more on advertising.

Let’s do a simple mockup example here. We are going to assume that you currently spend $1000 per month on cost-per-click (CPC) advertising (also known as PPC or Pay-per-Click as defined by Wikipedia). And for our example, we will say that your cost-per-click is $2.00. Let’s run the numbers…

Monthly Spend

$2000

CPC

2.00

Visitors (Spend / CPC)

100

Sales

2

Current Conversion Rate (visitors/sales)

2%

Cost per Sale (monthly spend/sales)

$1000

Current Situation Example

The above outlines a current example. Now let’s implement what many small business owners do to attempt to improve results. That is spending more money, and see how this plays out.

In this example, we are going to assume the ratios stay the same, although this is not usually the case. Often when we throw more at a strategy, we reach a critical mass for the current strategy which often leads to deteriorating results. But for simplicity, we will keep them the same, for example, the conversion rate is 2% and will stay at 2% for this example.

All we are going to do is increase our spend by 50% and evaluate the outcome.

Monthly Spend (increased from $2000.00)

$3000

CPC

2.00

Visitors (Spend / CPC) (increased traffic)

150

Sales

3

Current Conversion Rate (visitors/sales)

2%

Cost per Sale (monthly spend/sales) (remains the same)

$1000

Increased Marketing Spend Example

From the above example, we can clearly see that increasing the spending in marketing did in fact improve the sales volume (from 2 sales to 3 sales); however, the cost per sale remained unchanged, due to the overall increase in cost.

Another key point to note here is that we increased spending by 50%! That is a significant increase in expenses to achieve one more sales.

Now let’s compare the original example with conversion optimization. For simplicity, we will say that we increase the conversion rate by just 1% by applying some optimization we’ve found through going through a conversion optimization process.

Conversion Optimization

Increase Ad Spend

Monthly Spend

$2000

$3000

CPC

2.00

2.00

Visitors (Spend / CPC)

100

150

Sales

3

3

Current Conversion Rate (visitors/sales)

3%

2%

Cost per Sale (monthly spend/sales)

$667

$1000

Conversion Optimization vs Ad Spend Increase Example

The results above, showing 1% improvement in conversion rate versus 50% increase in Ad spends, produced the same sales volume-outcome; however, the cost to acquire the sale decreases from $1000 per conversion for Ad spend to just $667 per conversion for the optimization strategy with no increase in Ad spend.

But there is another metric here to be aware of. The 1% increase in conversion also improved profit by 33%.

Ask yourself what else in your business you can do that through a 1% improvement would generate 33% increase in profit? Very powerful! Compare this to the increased Ad spend, and the result of 50% more spend, is 0% improved profitability.

How to Set Up Conversion Optimization

Setting up conversion optimization initially can seem like a fairly big task if you haven’t already laid out the steps to your sales process and identified how you will capture data. But the good news is that once you’ve set this up properly, you can simply reuse the process over and over again to generate improvements.

To go through the process in detail, I will create a Steps to Conversion Optimization post soon, as it is a fairly in-depth process. For our purposes here, let’s discuss the bigger picture of the setup.

Begin by identifying each step a user takes to become your customer. So, for example, they have to hear about you. From this point, they need to take some action to learn more about you and how you can help service their need.

When they take action they then need to be informed, persuaded, educated, and lead to conversion. They need to take action on that conversion, and then we proceed to the after-sale process. Note that you can and probably should optimize sales and after-sale processes independently.

Conversion optimization is all about things you can control, and not worrying at all about things you have no control over.

We refer to these “things” as resistance points. Once you have laid out the steps a user takes to become your customer, you can then start to identify the resistance points in your process.

Finally, with resistance points in hand, it’s time to ensure you have a method of collecting the data. You need an accurate and reliable method at each point of knowing how many people entered a resistance point and from what source, to what how many proceeded through the resistance point.

Conversion Optimization Risks and Pitfalls

I think it is only right that while we are discussing the importance of conversion optimization, which as you should now be fully aware, is critical, that we also discuss the risks and pitfalls so you can hopefully avoid them.

The first and most obvious risk is when it comes to data, garbage in means garbage out. In other words, it is vital that you ensure your data is as clean and accurate as humanly possible. Spend a little time evaluating your data to ensure you are very confident in its accuracy.

Second, be sure you make small changes. It will be tempting to make really big changes when you start identifying resistance points. However, optimization is if you remember, all about failing fast forward. You need to assume your optimization may not help and frankly, that’s okay.

By A/B testing (testing the current version to what you believe is an optimized version) or multi-variant testing (having multiple optimized versions), and making small changes, you’ll be able to identify what is working (and causing it to work) and what is not working.

To learn more about conversion optimization, I recommend your next step be to review the steps in optimization (post coming soon). Proceed slowly and multiply your growth.

About George Gill

George Gill is the founder of GILL Solutions. He lives in Peterborough Canada, and is an avid learner, passionate trainer and speaker. For over 20+ years, he's helped businesses implement growth strategies and systems to consistently out perform their expectations. Measurement is always key!

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